by By Melanie Waddell – Think Advisor
A provision affecting 529 plan accounts was stripped from the bill before the vote.
The full House passed Thursday morning the Setting Every Community Up for Retirement Enhancement (Secure) Act of 2019, which would make it easier for small businesses to offer retirement plans and raises the required minimum distribution age to 72 from 70 1/2.
The bill, which passed by a 417-3 vote, also paves the way for more annuities in retirement plans and aims to raise revenue by changing the withdrawal rules on inherited IRAs by curtailing the “stretch IRA” strategy.
A House Rules Committee rule removed the portion of the bill that passed the House Ways and Means Committee allowing 529 account funds to be used for homeschooling, private elementary/high school expenses and special needs students.
But the bill still allows funds in 529 plans to be used to pay for student loans and apprenticeships.
The House Ways and Means Committee passed H.R. 1994, the Secure Act, on April 2. Rep. Richard Neal, D-Mass., the chairman of that committee, stated during the April 2 hearing that one of his “top priorities” as chairman “is to help workers of all ages prepare for a financially secure retirement.”
“I was greatly encouraged earlier this year when Chairman Neal reached out to me saying he was committed to getting retirement-focused legislation signed into law this year,” said House Ways and Means Committee ranking member Kevin Brady, R-Texas.
“Right away, he and I, and many Members of our Committee, worked together to develop” the Secure Act.
The bipartisan bill, Brady continued, “makes it easier for Main Street businesses to offer retirement plans to their workers by easing administrative burdens, cutting down on unnecessary and often costly paperwork.”
The bill also offers “local businesses the flexibility to tailor retirement plans to best fit the needs of their workers, not to the needs of Washington,” Brady added.
“Chairman Neal and Ranking Member Brady have demonstrated true leadership in shepherding this legislation first through committee and now the House,” said Wayne Chopus, IRI president and CEO, after the House vote, saying the measure moved quickly due to broad bipartisan support.
The Retirement Enhancement and Savings Act (RESA), S. 972, is similar to the Secure Act. Senate Finance Committee Chairman Chuck Grassley, R-Iowa, said on May 14 that passage of RESA “remains a top priority,” adding that he hopes the House “will send its version of RESA over to us this month.”
Paul Schott Stevens, president and CEO of the Investment Company Institute, said the Secure Act’s provisions “repealing the maximum age for making traditional IRA contributions and increasing the age required for mandatory distributions will help align policy with the reality that people are living longer today.”
As the Senate considers the RESA bill “and final legislation is negotiated, ICI strongly urges lawmakers to broaden the lifetime income disclosure provision so that it does not favor one retirement product over others,” Stevens said. “As currently written, the provision would provide a federal safe harbor solely to annuity illustrations based on current account balances, ignoring other important and valuable disclosure methodologies in use today. Such an illustration could mislead and discourage young, low-balance savers.”
ICI applauded other provisions of the Secure Act, including:
- allowing companies — regardless of industry — to join together to form multiple employer 401(k) plans;
- increasing the auto-enrollment safe harbor cap from 10% to 15%;
- treating certain taxable non-tuition fellowship and stipend payments as compensation for IRA purposes, thus making it easier for individuals receiving such payments to save through an IRA;
- repealing the maximum age (now 70½) for making traditional IRA contributions.